Free market forces sometimes fail to produce the desired equilibrium quantity and/or price for a variety of goods & services that benefits society as a whole. Sometimes, as in the case of externalities, if the external costs or benefits (costs or benefits borne by people other than the producer & consumer) of consuming or producing a good, are minimal, then the government will not intervene. If, however, these external costs/benefits are deemed significant 'market failure' is said to exist and the government will intervene.
If clean air is a social utopia why not ban all cars/factories/power plants in Shanghai/Hong Kong/Los Angeles?. Follow this link for a look at this question from an Economist's perspective:Economics USA - Pollution & the environment . Use this template to help you make notes:
For SL students, the microeconomics syllabus section will be assessed in Paper 1, an extended response paper and for HL students, the section will be assessed in Paper 1 (also an extended response paper) and Paper 3.
Examples of extended response questions related to Market failure-
Other sources of market failure
Common access goods, resource depletion and sustainability:If clean air is a social utopia why not ban all cars/factories/power plants in Shanghai/Hong Kong/Los Angeles?. Follow this link for a look at this question from an Economist's perspective:Economics USA - Pollution & the environment .
Use this template to help you make notes:
Market failure assessment:
Market failure revision:
Multiple Choice review:
For SL students, the microeconomics syllabus section will be assessed in Paper 1, an extended response paper and for HL students, the section will be assessed in Paper 1 (also an extended response paper) and Paper 3.
Answers to 2016 test: